What is the meaning of international economics?

International economics is the field of economics that is concerned with the

economic interactions of different nations as well as the economic interactions
between nations and international institution.
What Is Globalization?
Globalization refers to the spread of the flow of financial products, goods,
technology, information, and jobs across national borders and cultures. In economic
terms, it describes an interdependence of nations around the globe fostered
through free trade.

Globalization of economic activity.

It is the increasing economic integration and interdependence of national, regional,
and local economies across the world through an intensification of cross-border
movement of goods, services, technologies and capital.
Pros and Cons of Globalization
 A larger market for goods and services

 Cheaper consumer prices

 Outsourcing can benefit both domestic firms and foreign labor

 Increased standard of living

 Concentrates wealth in richer countries

 Some poorer countries can be left behind

 Poorer countries can be exploited of their labor and physical & intellectual
resources

 Cultures and the products consumed around the world can become
homogenized

What are the driving forces behind globalization?

Cultural exchange

Cultural exchange has been one of the biggest drivers of globalization. People travel
to different countries and share their cultural beliefs and practices with each other.
Through this process, a cultural understanding takes place which drives globalization.
Today, the same smart phones whether they are iPhone, Samsung, HTC, or Sonny
Xperia, are liked and used by people around the world. No wonder why
Indian/Bengali curries, and Chinese takeaways are so popular in the UK! Likewise,
now wonder why people around the globe are crazy for American burgers, software,
movies, and many more!

Improved transportation

Among the factors that have contributed to globalization, improved transportation

system is a key one. The world is called a ‘global village’. People can move around it
fairly quickly due to improved transportation systems. Airlines, ships, large vehicles,
and others have improved the delivery time of products to and from abroad. A
business man from London can go to Paris to do his ‘business’ and come back to
London on the same day. Likewise, goods can be transported beyond the national
borders on the same day. This happens in many parts of the world on a daily basis.

Low barriers to trade and investment

This also drives globalization significantly. Many of the world trades are currently
done through free trade, bilateral, and multilateral agreements. Interestingly, countries
which were very hostile or unfriendly to foreign investment few years ago, are
inviting other countries for inward foreign direct investment (FDI). China is a very
good example in this regard.

The EU, the USA, and the UK have free trade agreements with many countries. The
UK has come out of the European Union; however, has conducted consultations on
potential future trade agreements with other countries. It has indeed completed some
of the agreements so far. This shows that the importance of free movement of goods is
well recognized by countries around the world.

Technological changes

Technology is one of the key driving forces behind globalization. Advanced E-

commerce system has made the emergence of companies such as Amazon.com,
Alibaba.com, ebay.com, and many others possible and immensely successful. This
technological revolution enables traders from remote parts of the world to sell their
products/services to customers around the world on virtual platforms.

Natural Resources
The global GDP in 2020 was around 84.54 trillion U.S. dollars (O’Neil, 2021). A
massive number/number/number of natural resources such as minerals, coal, oil, gas,
water, etc. are required to keep the level of GDP this high or above. However, these
resources are not concentrated in one place, rather scattered around the world.
Therefore, the drive to have access to the resources encourage companies to go around
the world, and in the process contributes to the development of globalization.

Labor availability

In order to save costs, companies look for the countries that offer cheap labor costs.
Often people ask a question: Where do Primark, Gap, Next and many others produce
their products? The answer is: China, India, Bangladesh, Pakistan, and some other
developing nations.

In a nutshell, there are a number of factors that have contributed to globalization.

Many companies are now multinational corporations with subsidiaries around the
world. This gives managers more opportunities for growth and development

The First Wave

From 1860-1914 Europe and North America were strongly affected by internationalization. The
flow of goods accelerated. Capital moved relatively freely between countries. In some respects,
financial integration was more pronounced than it is today. Even international migration was
greater than it is today. Roughly 60 million people left Europe to seek their fortunes in the New
World.

Important drivers behind this wave of globalization were both the new technology of the era that
could bridge long geographical distances and the fact that many countries began to embrace
liberal trade policy after years of protectionism. During the period 1500-1800, world trade
increased by about 1 percent per year. After 1820 it increased by 3.5 percent and during the
nineteenth century as a whole, trade in Europe increased by 40 percent.

Great Britain was the world's leading economy. The basis for the European free trade system was
the 1860 free trade pact between Great Britain and France. Many other European countries
subsequently aligned themselves with this free trade system.

Great Britain had introduced the gold standard in 1816, which meant that their currency gained a
stable value in relation to gold. During the nineteenth century the English pound sterling was the
generally accepted currency of international business and many other countries introduced the
gold standard.

Sweden and Denmark established a monetary union based on the gold standard and with the
kronor as the monetary unit. Two years later Norway joined the Scandinavian monetary union.
The kronor had the same value in all three Scandinavian countries and the currency in each of
the countries could be used interchangeably in daily transactions.

The Second Wave

International regulations and organizations to support economic integration at the global level
were created after World War II. Cooperation was based on the Bretton Woods Agreement of
1944.

The USA was now the leading economy in the world and the dollar became the monetary basis
of the financial system. The 'Bretton Woods system' meant that nations had fixed currency
exchanges in relation to the US dollar, which in turn was fixed to the gold standard.

In an important aspect, the post-World War II international economy was less open than the
period prior to World War I. Before World War I the international flow of capital had been free.
The Bretton Woods system was based on governmental control of the international flow of
capital.

Two organizations were established during this period, the World Bank (IBRD) and the
International Monetary Fund (IMF). In addition, a special agreement, the General Agreement on
Tariffs and Trade (GATT) became operative in 1948. In practice GATT became the international
organization which set the framework for several important steps towards increased global free
trade, particularly via successive reductions in industrial tariffs.

But by 1970 the Bretton Woods system was coming under increasing pressure. The primary
reason for this was the escalating cost of the Vietnam War and of the 'Great Society' social
reform programmed which led to a US budget deficit and to inflation.

In 1971 the US President Richard M. Nixon "closed the door" on the gold standard and the first
devaluation of the dollar come a year after. The post-war international currency system was then
further shaken by the oil crisis of 1973.The Third Wave
Since the 1970s the cost of processing, storing and transferring information has decreased
dramatically, thus creating new possibilities for international trade and business.

In addition, political trade barriers have been relaxed in many ways. The World Trade
Organization (WTO) was established in 1995 and capital has again become more elastic.

The more populous countries in the developing world, particularly China and India, have opened
their doors to the world. European cooperation has widened and deepened. The fall of the Berlin
Wall in 1989 can be seen as a suitable starting point then for the third wave of globalization.

In the last few decades, international trade has grown significantly faster than total production.
The export of goods amounted to 31 percent of global GDP in 2006 as compared to 12 percent in
1970. Foreign direct investment (establishing or buying up companies abroad) has increased
twice as fast as trade. An even more rapid increase has been seen in foreign securities
(investments that do not lead to controlled ownership in foreign companies).

We are now in a truly exciting phase of global economic development. Globalization gives rise
to a number of new business potentials. But business potentials are not discovered in the same
way as one discovers a mineral deposit. Rather business possibilities are created in the way that
one creates a work of art – by combining a range of variables in a unique manner.
The only thing that we can say for certain about the future's most successful international
entrepreneurs is that we certainly cannot know what they will build their business ideas upon.
An open market is an economic system with little to no barriers to free-
market activity. Open markets may have competitive barriers to entry, but
never any regulatory barriers to entry. The United States, Canada, Western
Europe, and Australia are countries with relatively open markets.

NIEO: - New International Economic Order is an economic system introduced to

replace Bretton Wood System in 1970s by some developing countries through
United Nations Conference on trade and development to promote their interests by
improving their terms of trade.
The New International Economic Order (NIEO) is a set of proposals advocated by
developing countries to end economic colonialism and dependency through a new
interdependent economy.[1][2] The main NIEO document recognized that the
current international economic order "was established at a time when most of the
developing countries did not even exist as independent states and which
perpetuates inequality."[3] In the spirit of "trade not aid," the NIEO called for
changes in trade, industrialization, agricultural production, finance, and transfer of
technology.

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